Mumbai: Amid the economy's decelerating, the Reserve Bank on Friday said the domestic policy uncertainties and the tight monetary stance are among the factors leading to slowdown and cautioned against downside risks to growth.

"Growth is clearly decelerating. This reflects the combined impact of several factors-- the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties," it said in monetary policy review.

While several key economic legislations, including insurance and PFRDA bills, are pending in Parliament, the government had to recently put on hold its decision to open the multi-brand retail sector to foreign investors.

Before Friday's halt in rate hikes, the central bank had increased key policy rates 13 times since March, 2010, to tame rising prices.

The central bank said since October the global economic outlook, amid euro zone crisis, has worsened significantly and is posing threats to emerging market economies (EMEs), including India.

Referring to its earlier GDP growth projection of 7.6 percent for the current fiscal, the RBI said "considering the global and domestic macroeconomic situation, the downside risks to the RBI growth projection, as set out in the second quarter review (in October), have increased significantly".

In October, the RBI had revised downward its growth projection to 7.6 percent, from 8 percent earlier, citing high inflation and global slowdown, as major reasons.

The government has already lowered its estimates for the economic growth to 7.5 percent from 9 percent.

"Overall, the growth momentum in the economy is clearly moderating," the RBI policy document added. RBI further said that while agricultural prospects look promising on account of expected record kharif output and satisfactory progress on rabi sowing, there are concerns on industrial performance.

"Industrial activity is moderating, driven by deceleration in investment, which is a matter of serious concern," the central bank said.

The review said the deceleration in economic activities during the second quarter was mainly due to a sharp moderation in industrial growth. Factory output shrank by 5.1 percent in October, mainly due to contraction in manufacturing and mining activities.

Economic growth in July-September quarter slumped to a 6.9 percent, the lowest in over two years, against 8.8 percent in the same quarter of last fiscal. Growth in the first half (April-September) stood at 7.3 percent as against from 8.6 percent in year-ago period.

Referring to the recent European Union summit, it said the "agreement did not assuage negative market sentiments, thereby increasing the likelihood of persistent financial turbulence as well as a recession in Europe".